Dow Chemical's 1Q profit drops 34 percent

FILE - This April 12, 2007, file photo, flags fly at an entrance to Dow Chemical Co. in Midland, Mich. Dow Chemical said Thursday, April 26, 2012, that its first-quarter earnings fell 50 percent after it took a pre-tax charge of $357 million to close some of its plants. Excluding restructuring costs related to the plant closures and other special items, Dow said it earned 61 cents per share. Revenue was flat at $14.7 billion. (AP Photo/The Saginaw News, Ryan Evon, File)

Dow Chemical's winter doldrums have given way to some spring optimism.

The chemical manufacturing giant said volumes improved in every sector and most geographic regions in March, as customers began rebuilding inventories from last year's low levels. That helped offset sluggish sales in January and February.

The company's net income dropped 34 percent in the first three months of the year in part because of a $357 million pre-tax charge related to plant closures that occurred as a result of weak business conditions in Europe.

For the first quarter, Dow Chemical reported net income of $412 million, or 35 cents per share. That compared with $625 million, or 54 cents per share, during the year-ago quarter. Net income in both quarters included $85 million in preferred stock dividends. Revenue was flat at $14.7 billion.

Excluding restructuring costs related to the plant closures and other one-time items, Dow said it earned 61 cents per share.

Analysts, who typically exclude special items, expected earnings of 59 cents per share and revenue of $14.96 billion, according to FactSet.

The Midland, Mich., manufacturer said that overall sales volume rose 3 percent, driven by a 12 percent jump in agricultural products and a 7 percent increase in feedstocks and energy. That was offset by flat to slightly lower volumes in other business segments.

Demand improved in the U.S. Latin America remained strong and a rebound in China markets picked up in March. There were positive signs in Germany but, overall, Europe continued to struggle.

That demand momentum is expected to continue in the second quarter and throughout 2012, although Europe is "still a bit of a wait," said Dow Chemical chairman and CEO Andrew N. Liveris.

"We don't want to be irrationally exuberant, but there's good tailwinds coming out of March," he told analysts during a conference call.

Morningstar Inc. analyst Jeffrey Stafford said that the improvement reported in March "gave me confidence that results for the company will improve in the coming quarters."

But he added that the biggest challenge that Dow faces is stability in the global economy and the health of its customers' businesses.

Europe continues to struggle with a massive government debt crisis that has pressured the region's economy. China's economic growth has slowed while the U.S. economy is getting healthier.

Earlier this month, Dow Chemical took steps to restructure its business because of weak sales in Europe, which is struggling with a massive debt crisis. It cut 900 jobs, and closed plants in Charleston, Ill., Portugal, Hungary and Brazil. It also idled operations at a plant in the Netherlands.

Dow Chemical manufactures basic materials used in nearly every sector of business, from consumer products like televisions and toys to automobiles and agriculture.

Shares of Dow Chemical fell $1.23, or 3.4 percent, to close at $34.85 Thursday. The stock has ranged from $20.61 to $42.23 in the past 52 weeks.